What Happened?
A number of stocks jumped in the afternoon session after a government report indicated a cooling in wholesale food inflation, a key cost for the industry.
The U.S. Bureau of Labor Statistics reported that its Producer Price Index (PPI) for final demand was unchanged in July. More specifically for the restaurant industry, the index for processed foods and feeds fell by 0.5 percent. The PPI measures the average change over time in the selling prices received by domestic producers for their output. A decrease in this index suggests that the input costs for companies are falling, which can lead to higher profit margins. This potential for improved profitability comes as several major fast-food chains are introducing new value deals to attract customers who have become more price-sensitive after years of rising menu prices.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.
Among others, the following stocks were impacted:
- Modern Fast Food company Portillo's (NASDAQ: PTLO) jumped 8.8%. Is now the time to buy Portillo's? Access our full analysis report here, it’s free.
- Modern Fast Food company Wingstop (NASDAQ: WING) jumped 3%. Is now the time to buy Wingstop? Access our full analysis report here, it’s free.
- Traditional Fast Food company Papa John's (NASDAQ: PZZA) jumped 3%. Is now the time to buy Papa John's? Access our full analysis report here, it’s free.
- Modern Fast Food company Sweetgreen (NYSE: SG) jumped 3%. Is now the time to buy Sweetgreen? Access our full analysis report here, it’s free.
Zooming In On Portillo's (PTLO)
Portillo’s shares are very volatile and have had 27 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 29 days ago when the stock gained 2.7% on the news that reports revealed signs of easing input cost pressures as the Producer Price Index (PPI) for final demand fell 0.3 percent in June. The decline was largely driven by a 1.4 percent drop in prices for final demand goods. For food producers, the report was particularly favorable, as the index for final demand foods decreased by 0.6 percent, and the index for unprocessed foodstuffs and feedstuffs fell by 2.1 percent. Key components leading this decline included lower prices for grains and oilseeds. This moderation in raw material prices, a key expense for these companies, can directly benefit food processing companies by lowering their cost of goods sold, potentially leading to improved profit margins.
Portillo's is up 9.5% since the beginning of the year, but at $5.03 per share, it is still trading 37.7% below its 52-week high of $8.07 from August 2025. Investors who bought $1,000 worth of Portillo’s shares at the IPO in October 2021 would now be looking at an investment worth $172.68.
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